WORLD'S BIGGEST HEDGE FUND: Stock markets around the world will tank if Trump wins

Ray Dalio

Heidi Gutman / CNBC

Ray Dalio talks at the Alpha Exchange panel at the CNBC Institutional Investor Delivering Alpha conference September 13th in NYC

The world's biggest hedge fund thinks stock markets around the world will tank if Donald Trump wins the US presidential election.

Bridgewater Associates expects a 10.4% drop in the US equities market should Trump win the presidency, according to an investor note sent Tuesday obtained by Business Insider.

A Clinton win would boost the market 2.3%, according to the note.
The numbers represent the hedge fund's "updated rough estimates of the likely market action depending on the election result," Bridgewater said.

The note, written by the firm's co-chief investment officer Greg Jensen, Jason Rotenberg and Jeff Amato, made clear that they were not taking a political stance on either of the candidates.

"We are global macro investors, not political experts," the trio wrote.

Other equity markets that would plummet on a Trump win: European equity markets by 10.8%, Japan by 9%, and China by 11.4%, the note said.

A Clinton win, on the other hand, would boost those markets in the low single digits, the note said."The impact of a Trump win is larger because the odds of a Trump victory are currently smaller," the note said.

The hedge fund also expects:

  • The euro to surge 4.9% compared to the dollar on a Trump win, compared to a 1.1% drop if Clinton takes the presidency.
  • The Mexican peso to drop 13.1% if Trump wins, and rise 2.9% if Clinton wins.
  • The Japanese yen to surge 6.2% if Trump wins, and fall 1.4% if Clinton wins.
  • Gold would surge 8.6% on a Trump win, while it would drop 1.9% with a Clinton win.
  • Oil, meanwhile, would drop 2.9% on a Trump win, and eke out a 0.6% gain on a Clinton win.

In the short term, the hedge fund expects it would experience investment losses equivalent to a bad month if Trump wins, calling it "a manageable loss." The note added that a Clinton win would mean the firm would "likely net a modest gain."

"Over time, we expect to capture the effects of either Trump's or Clinton's policies on markets and economies and adjust our views accordingly," the note said.

Bridgewater's external PR firm Prosek Partners didn't immediately respond to a request for comment.

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